Mayor hails loan refinance as sign of Burlington's financial recovery

Jan. 9, 2014

Left, Mayor Miro Weinberger takes questions after announcing a bond deal Thursday that he says will save Burlington taxpayer about $4.8 million. He said the deal is another sign that the city is getting it's financial house in order. / RYAN MERCER/FREE PRESS

Written by

April Burbank

Free Press Staff Writer

Burlington has refinanced a $14.6-million bond, saving ratepayers millions of dollars in interest over the next 20 years, Mayor Miro Weinberger announced Thursday.

The original bond was issued in 1992 and used to upgrade the city’s three wastewater plants, said Laurie Adams, assistant director for water quality at the Department of Public Works. The outstanding amount of $14.6 million was due this month.

Weinberger said the bond refinancing through the Vermont Municipal Bond Bank is evidence that the city’s finances are moving in the right direction.

“We have now addressed another significant unfunded liability that this administration inherited,” Weinberger said. “When we came into office, there was no clear plan for this major fourteen-and-a-half million dollar balloon payment.”

Burlington’s financial standing took a blow in 2012 when Moody’s Investors Service downgraded the city’s credit rating to a step above junk-bond status, citing the city’s low cash balance and financial strains associated with Burlington Telecom. The rating remained stable last year with a negative outlook.

The Vermont Municipal Bond Bank, however, had enough confidence in Burlington to issue the loan with a 3.853 percent net interest rate.

“Burlington appears to be taking the right steps to correct the financial situation,” said Robert Giroux, executive director and secretary of the Vermont Municipal Bond Bank.

If Burlington had not been able to refinance through the Vermont Municipal Bond Bank, it would have likely faced an interest rate of about 6 percent, according to a city news release, resulting in additional interest payments of $4.8 million over the life of the loan — a cost that Weinberger said would have been borne by ratepayers.

“There will not be need for future rate increases to pay this debt,” Weinberger said. “I’m not saying the rates will never go up for any reason, but ... it won’t be to pay for increasing financing costs.”

State Treasurer Beth Pearce, who is also a board member for the Vermont Municipal Bond Bank, said she had been “very impressed” with recent changes to Burlington’s accounting system and the way it dealt with short-term debt.

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Burlington residents approved a $9 million “Fiscal Stability Bond” in November 2012, which Weinberger said helped the city to secure the low interest rate with the bond bank.

“I hope that Burlington voters see today as one of the first concrete pieces of news that their sacrifices that they made when they chose to pay a little bit more to support the fiscal stability bond — they’re starting to get returns on that investment,” Weinberger said.

Weinberger also thanked the City Council for being willing to raise wastewater rates in recent years, which he said allowed the refinancing to happen.

“Those were important,” Weinberger said. “No one ever likes to raise rates, but sometimes you have to do it.”

The mayor said Burlington continues to face significant financial challenges.

“We are not out of the woods yet,” Weinberger said. “We still have the substantial Burlington Telecom uncertainty, this major lawsuit that is unresolved. We know we have this major unfunded liability with our pension. ... So this remains our top priority and will need to be our top priority for some time to come.”